A few weeks back, I wrote a post for The Money Mix to review the DiversyFundGrowth Fund. This real estate fund is a private REIT (real estate investment trust). It falls into the category of crowdfunded REIT. They've made real estate investing available to smaller investors.
The more I looked at the fund, the more I liked it. The way they approach real estate investing is pretty unique in this space. They're not trying to be all things to all people, like other REITs. I won't go into the details of that here. You can read about it here.
I reached out to DiversyFund to ask if their CEO, Craig Cecilio, would be willing to do an interview with me to introduce himself and DiversyFund. He was kind enough to agree to the interview. What follows is our conversation.
He has decades of experience in the real estate industry. You'll hear why he started DiversyFund and what he and the team hope to accomplish. Craig is an open, honest, and interesting person. I asked him a tough question that he did not shy away from answering.
Craig has a vision, and his team at DiversyFund are a quality group. You can decide for yourself if you agree after hearing from him.
With that, here is our conversation.
Tell us a little about yourself.
I have been living in San Diego since 1997 but was born and raised in Fairfield, CT. I attended college in Boulder, CO. My east and west coast competitiveness combine with a mentality and a splash of Rocky Mountain charm that thrive, both in business and in life. I’m a very competitive, mission-oriented person. That fuels my passion for the companies that I have built.
Outside of work, I spend time with my wife dining at local gastropubs and hanging out with my two daughters. We attend soccer games on the weekends. There are like-minded leaders I like to network with. Working with charities and tackling social issues are both important to me. I was formerly on board of directors of ARTs. To quench my thirst for extremes, I like competing at CrossFit with 20-year-olds, tackling a long run, or an extreme fitness event.
I enjoy spending time mentoring other promising entrepreneurs in life and business. I find that the relationships that work the best are with those who share my values and work ethic.
Tell us about your career path.
In the late 90s, I secured my real estate license and ended up working in a boiler room as a 1099 employee. It was so archaic that we had to pay the company for leads, bring in our own computer and set up our own work email. Still, there was a waiting line to get an office desk, and you couldn’t have a desk unless you produced. I remember paying for business cards and internet service before I even had a desk.
Before founding Diversyfund in 2016, I worked for nearly 20 years raising and managing over $500 Million in assets. All these deals made me realize that the traditional ways of raising money for real estate projects were archaic and excluded the average investor. I’m a very driven, competitive guy and I’m really passionate about making the same wealth-building opportunities of the 1% available to the 99%.
You’ve been in the real estate business for a while then. What motivated you to start DiversyFund?
Because of my experience as a syndicator and sponsor, I saw how the industry needed disrupting. I didn’t understand why wealth-building opportunities were exclusive to the already wealthy. I have wanted to democratize the industry and open up these deals to the average American for a very long time.
Tell us about the company. Who are the owners? How long have you been in business?
In 2015, I met my co-founder Alan Lewis. He shared my same vision. After Alan’s 20 years as a lawyer and investment banker, he witnessed the wealth inequality first-hand on Wall Street.
In May of 2015, Congress amended the JOBS Act that introduced a way to accept investments from everyday people. Soon after the legislation passed, we started laying the groundwork to qualify under the SEC to open up alternative investment opportunities under the new regulation.
We incorporated Diversyfund, Inc., on August 18th, 2016, and we began to work on our vision.
Two years later, in November of 2018, DiversyFund was qualified by the SEC, which marked the beginning of the company as it is today.
Our goal is to democratize investing – to bring equal investing opportunities to all. We do this by leveraging tech to bring the opportunities to all, to make it easier for people to invest anywhere, and to take the bias out of investing
We provide the opportunity to access something that used to require millions of dollars. Investors can start with as little as $500. Also, we offer educational resources so people can make the right decision for their wealth-building journey. We make so easy you can do it on your phone.
Let’s get this out of the way early. You had a legal proceeding at a previous company in which you agreed to a small settlement. Tell us about that.
It is perfectly normal to go through audits. It’s just part of doing business. It’s unrealistic to expect a firm won't get audited. All companies are required to go through examinations. Due to lack of government funding, they are not as often or publicized as they should be. In this case, the agency gave us a small $3,000 infraction. Remember, I started this company in 2003 and had no previous fines, issues, etc. which is pretty impressive.
It looks worse than it is. I should be getting a pat on the back as to how I ran the previous company. This particular business managed over $17,500,000 in investment dollars by the end of 2015. The audit found no fraud, commingling of funds, or misappropriations of funds at all. They cited a lack of proper procedures, which was due to not having one sentence in a 3-page document.
After the audit, I went the extra mile and brought in an external compliance team. We worked with our CPA firm to analyze our accounts to make sure everything was reconciled and reported correctly.
Let’s get to the point. We correctly filed all the paperwork with the regulatory agencies and all investor dollars plus interest got paid — end of the story.
Thanks for your honesty. In the larger scheme of things, it does seem like much ado about nothing. Let's move on. There are a lot of crowdfunded real estate platforms these days. Some might ask, why do we need another one? How would you answer that?
Every industry needs a healthy level of competition. It just means there’s a real need for the service/product. I’m glad that fintech as a sector is growing and that more and more people are now taking action to secure their financial futures. As far as platforms, I think there’s room for improvement. That’s what we've set out to do. We’ve structured our company, so our interests stay aligned with our investors.
Our goal is to bring opportunities to diversify to more people, and we’re looking to go beyond real estate and open up other alternatives in the future.
Your current offering is DiversyFund Growth REIT. What makes the fund different? Why should people invest in this vs. one of the other funds that have a longer track record?
The way we are structured is very different from other companies. We are vertically integrated, meaning we source, own, and manage the assets ourselves. That means that our investors are co-owners and investment partners with us and own a percentage of the REIT’s commercial real estate portfolio. It's the way we keep our interests aligned with our investors.
Everything we do is with our customers' interest in mind. The companies and individuals we partner with are also consumer-centric. Our goal is to change the way things get done by creating a win-win environment for all parties.
So you’re looking for capital appreciation rather than income. What kind of growth are you looking to achieve? What gives you the confidence that this is attainable?
The primary strategy of the Growth REIT is value-add and market appreciation. The majority of the cash flows from the multi-family assets get reinvested to increase overall returns to investors. Our goal is for people to grow wealth and get the highest return possible. Look at the wealthy. They look long term and have the understanding that in the long run, you make more money by reinvesting your money.
Both Alan and I, along with our Real Estate team, have worked in various market cycles over the past 20 years and know how to deal with shifting markets.
DiversyFund also has an exciting program for accredited investors. Tell us about your Series A offering? It seems you’re attracting VC type of money from smaller investors. Tell us why you did it this way? What are the advantages to the investor? To DiversyFund?
Everything we do is based on our mission to open up opportunities to the average investor. We would be hypocrites if we raised our Series A dollars by going to the old guard. That practice is precisely what we are trying to change. It may be the “harder” way to go, but we believe it’s the right thing for us.
What else would you like people to know about you or DiversyFund?
Let’s get real here. I came from a working middle-class family, and I have been doing this for a long time. I am building DiversyFund from the ground up. Many in this space had advantages in that they already came from wealth and had the connections.
I expected to get push back now that I exist in the digital world. The pushback comes from competitors, older customers, and former employees who see my success and appear jealous of it.
We are building this by building a community. We're not going to use venture capital. We’re not going to use institutions. A couple of comments online will not stop my resolve. Not.Gonna.Happen.
Look, we expect more and more people to come out against us. Think about this for a minute. If you’ve been accustomed to building wealth a particular way for decades and see someone coming up to change that–wouldn’t you want them to fail? We’ve reached out to partners and found out that competitors are blocking them from doing business with us. We understand that’s just part of doing business.
We can't change the status quo without starting a movement. If you're the type of person who wants to exclude others from these opportunities, you're probably not the right fit for DiversyFund.
Thanks, Craig for taking the time to talk. I love what you said about democratizing real estate investing. I agree that this type of investing has only been available to the selected few in the past. Large endowments have large portions of their portfolios in commercial real estate and development. About the only real estate available for the smaller investors are publicly traded REITs. Their structure makes them more of an income-oriented investment than a growth vehicle. Growth how is one builds wealth in real estate.
I wish you well in your new company. Your experience, philosophy, technology, and real estate investing strategy make a lot of sense. Anyone looking to get started in real estate investing without committing large amounts of money would do well to check out your Growth REIT.Follow us